Grassroots Growth for Poverty Reduction Universal economic access

Grassroots Growth for Poverty Reduction Universal economic access 17 April 2013

Global context State of the nation Essentials for growth and jobs Local enablers �

German Dax and Industrial Production: … Fundamentals not following markets Source: INet

S&P 500 and Earnings: Liquidity-driven momentum Source: INet

QE and the US economy: hiding recession? ? Source: INet

QE: Short Term and Long Term Short term Stabilization Long Term Debt escalation QE Costs Small vs Large Debt: Systemic Ponzi QE escalation shortens the long term timeline

QE: Central Banks starting to compete? Source: Federal Reserve of St Louis

Global debt levels are accelerating May well be developing into a systemic PONZI scheme Systemic collapse Credit worthy capacity Debt Systemic instability Debt needed to sustain the system BCA: the debt super cycle Time Dynamics at the 11 th hour, as governments compensate

Excessive debt levels mean financial repression is returning A concept widely understood in the 1970’s Coined in 1973 by Shaw & Mc. Kinnon Described EMs financial systems over 1960 s-80 s. Why is it important? liquidating debt!!! Same for developed economies (WWII to the 1980 s)

How is Repression achieved? Red Tape Corruption Tax (Especially Wealth) Fiscal & Monetary Policy Tools of Repression Market Dominance Inflation/Deflation

…But SA is in a good neighborhood!! African investment risk declining Africa Europe Solv e ncy s Taxe cy en Solv Tax Bur den Jurisdiction risk is changing. . but Neither Africa nor Europe completely homogeneous

Macro-economic outcomes Proof of the pudding 3. 5% th Grow 1995 3. 6% 2000 5. 1% 2011 40. 1% Infla tion 15. 0% Improving economic management 8. 2%

Global context State of the nation Essentials for growth and jobs Local enablers �

Business and Consumer Confidence: decade lows Source: INet

Retail Sales: losing monentum Source: INet

Car Sales: good but cycle has peaked Source: INet

SA Manufacturing: Recessionary conditions Source: INet

Current Account Deficit: major risk to the rand Source: INet

SA Interest Rates: low for much longer Source: INet

Global context State of the nation Essentials for growth and jobs Local enablers �

Understanding the growth model: Credit & consumption …or…savings & investment Investment Savings Growth Essentials Property Rights Rule of Law Red Tape Investment timelines are important

Unemployment | 2001 – 2011 Proof of the Pudding!! • Brazil Unemployment • South Africa Unemployment 32 12. 5 30 11. 5 10. 5 28 9. 5 26 8. 5 7. 5 24 6. 5 22 5. 5 20 4. 5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Brazil unemployment: The Enigma Source: INet

1986 1990 Divergent Outcomes Co Co rpo nc rat en e tra GD tio P n Ca St pit ock ali za Mar tio ke n t Bu Pe sine rsp ss ec tiv Sm e all Bu sin es BR s Bu ICS sin a es nd s. S tra teg y Brazil & SA | Corporate Development Hyperinflation Isolation 1994 1998 200

Indian Business Conditions | In spite of unfavorable macros: complex but thriving Entrepreneurship IMPROVING BUSINESS CONDITIONS Global Vision Competitive 1 Conglomerate 3 2 State & Private Sector 4 Corporates & SMME mix 5

Job creation means employer creation …the scale needs to be understood Entrepreneurship SMME’s Household Savings Jobs Essentials Incentives Rent Seeking Appropriate Regulation Job creation must be the most important priority Poverty and inequality are consequences of unemployment

Jobs, minimum wage and global competition All variables are relevant Wages/Jobs Tradeoff Employment Vision Price & Value Technology Machinery Skills China Germany Japan

Poverty | Slums a manifestation People work where they live Govt provision of water and electricity Very little town planning Lowers living costs Crime rate low Regulatory restrictions low 1 2 3

Global context State of the nation Essentials for growth and jobs Local enablers �

Economy must be accessible at grassroots level …avoid ‘doing things for the poor’ Educational Institutions Microeconomic Reform Town Planning Local Enablers Service Delivery Productivity Cost burden must be competitive Policy Priorities

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